BRICS started out with a lot of promise when it came into existence in 2009 and all the members were the world’s top emerging economies. There was hope that their demands would be heard and by the international financial institutions.
There was a chance of BRICS falling apart this year at the forthcoming in Xiamen in China (3 to 5 September), but fortunately that disaster has been averted. The BRICS meeting will hopefully begin in a less tense atmosphere without the faceoff at Doklam and it will be good for both China and India to realise how important it is for them to be together in the five member forum. It will be watched with great interest by the rest of the world. They are the two most populous countries in the world and together they have much clout in all international negotiations already evident at the WTO where the two took a joint stand against agricultural subsidies of the US and EU recently.
Together the BRICS can achieve a lot because they contribute 23 per cent to the global economy yet in the last meeting in Goa where India was the host, it produced a lacklustre communique/declaration which did not display any strength of conviction in taking drastic steps towards reforming global governance or the international financial architecture. This time in China, BRICS should realise how close they were to disintegrating which has been the sadistic prediction of the western countries in the past. They still remain a very powerful combine that can take decisions on behalf of all developing countries regarding their infrastructure, indebtedness and development financing.
BRICS started out with a lot of promise when it came into existence in 2009 and all the members were the world’s top emerging economies. There was hope that their demands would be heard and by the international financial institutions which would usher a change in the global financial architecture. Their collective pressure did bring about a change in the IMF quota regime for India and China in 2016. Both managed to get higher quotas. The dominance of G7 countries has been slightly eroded with two Asian giants getting their rightful voice in the IMF. Even now more reforms are needed in IMF’s governance that would ensure higher quotas and voting rights to the Emerging Market Economies.
The BRICS Summit 2017 should discuss the significance of the Renminbi becoming a reserve currency in IMF’s Special Drawing Rights along with the Japanese Yen, British pound sterling, US dollar and Euro. There should be more discussion on currency swaps between BRICS members so that the need for huge dollar reserves is reduced in the future. Russia and China already have a big currency swap arrangement of $24 billion which is a kind of mutual credit line between the central banks of the two countries. The BRICS have not yet set up their own credit rating agency—an item that should figure in the summit agenda this year. Also a Payments system like the SWIFT was contemplated but never established. It would enable international settlements in national currencies and would be an alternative to SWIFT.
The establishment of New Development Bank, CRA (Contingency Reserve Arrangement) and AIIB ( Asian Infrastructure Investment Bank) established in Shanghai and Beijing with a capital of $250 billion should offer a challenge to the World Bank which has a capital base of $252.8 billion. Moreover unlike the IMF, NDB has equal voting rights for all its members and is democratically structured. The AIIB has started functioning already and is offering loans for green infrastructure and India’s Canara Bank has secured a loan of $250 million from it last year. There are no conditionalities involved and it will help developing countries access loans for their sustainable development projects without much problem.
Together the BRICS can fight terrorism and the spread of international terror organisations as well as agree on climate change. They can act together on the important issue of cybersecurity and cooperate on e-commerce, intellectual property rights, single window clearance for investment and removal of nontariff barriers which hinder smooth trade. It would also be another opportunity for India to reconsider joining Belt and Road initiative of China for building infrastructure in the South Asian region.
It is time to rethink alternative trade and investment avenues to boost the member countries’ growth. China is the biggest trading partner of all the other BRICS members. Safeguarding the multilateral trade system will most likely be on the agenda.
The last communique in Goa had few distinctive features and looked like another G20 document. Indeed all the five members are also members of G20. Cultural exchanges and people to people contact have figured in the Goa declaration and were a welcome addition which should be further explored. China hopes that the Xiamen summit will usher in the global decade of BRICS and has issued a special postal stamp to commemorate the 9th BRICS summit.
Except for Russia all the members of BRICS are developing countries and hence they should focus on health, nutrition, education, urbanisation, drug regulation and agricultural research. All have small, medium and micro enterprises. Hence cooperation in tackling similar technical quality control and financial problems that BRICS members are experiencing in MSMEs would bring much value addition to the deliberations. Their efforts should focus on integrating the MSMEs production into the regional and global value chains which will enable members to raise their workers’ incomes. Reducing inequality of incomes should also be a focus of the meeting.
The idea of BRICS plus could have come up but fears that others may vehemently discourage induction of others at this juncture, China has decided against it. Russia may play the role of an important mediator in the Meeting between members especially India and China. Leaders of Guinea, Mexico, Thailand, Egypt and Tajikistan will attend the BRICS summit this year as China’s special guests just like India invited the members of BIMSTEC (which included Bangladesh, Bhutan, Nepal, Thailand, Myanmar and Sri Lanka) at the Goa meeting.
BRICS may crumble or remain intact. It may get strengthened due to a new bonding between India and China and BRICS may enter into the global decade!
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David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany
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